NEW YORK, May 25 (Reuters) - U.S. consumer sentiment rose to its highest level in more than four years in May as Americans stayed optimistic about the job market, while higher income households expected to see bigger wage increases, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same.

It was the highest level since October 2007.

"Unfortunately, consumer confidence is still extremely vulnerable to a reversal, as occurred in the past two years," survey director Richard Curtin said in a statement.

"While their most optimistic expectation for job growth could go unfulfilled without much harm, if the recent slowdown in job growth persists in the months ahead, it could form the basis for a third retreat in confidence."

Half of all consumers said the economy had improved during the past year, while buying plans for vehicles and household durables also improved. The gauge of buying plans rose to 132 from 126.

Higher income households anticipated a 2 percent income increase in the year ahead, while lower income households expected just a 0.3 percent gain.

The survey's barometer of current economic conditions jumped to 87.2 from 82.9, while its gauge of consumer expectations improved to 74.3 from 72.3.

The indexes where at their highest levels since January 2008, and July 2007, respectively.

The survey's one-year inflation expectation eased to 3.0 percent from 3.2 percent, while the survey's five-to-10-year inflation outlook dipped to 2.7 percent from 2.9 percent. (Reporting By Leah Schnurr; Editing by Chizu Nomiyama)